A small firm operating in a purely competitive market has fixed costs of $45 per day compensates each employee $96 per day and has daily input and raw material costs as indicated in the table below. A. What would be the profit maximizing level of production if demand increased such that each unit sold for $130?, will the company make an economic profit producing this quantity of output? b: suppose the demand significantly decreased so that price for a unit of ouput sold to $115 each. What should the firm do? Why?
A small firm operating in a purely competitive market has fixed costs of $45 per day compensates each employee $96 per day and has daily input and raw material costs as indicated in the table below. A. What would be the profit maximizing level of production if demand increased such that each unit sold for $130?, will the company make an economic profit producing this quantity of output? b: suppose the demand significantly decreased so that price for a unit of ouput sold to $115 each. What should the firm do? Why?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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A small firm operating in a purely competitive market has fixed costs of $45 per day compensates each employee $96 per day and has daily input and raw material costs as indicated in the table below.
A. What would be the profit maximizing level of production if demand increased such that each unit sold for $130?, will the company make an economic profit producing this quantity of output?
b: suppose the demand significantly decreased so that
Transcribed Image Text:123
144
Marginal
# of
Units
Fixed Raw
Avg.
Cost per
Total
Total
Avg.
Variable Total
Total
Employees of
costs Material Labor Variable Cost
extra unit
Output
of output
costs
costs
costs
Cost
Cost
0.
$0
1
$35
$ 52
3.
$75
4.
$ 105
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